The strong momentum in tech stocks has sort of died off after entering 2016. As a matter of fact, several big names in the Internet industry are deep in the red year-to-date. But Facebook Inc (NASDAQ:FB) stock has been an exception. Since the beginning of this year, Facebook stock has climbed 7.3%.
On its own, the single-digit rise does not look that impressive. But note that before this, FB stock had already surged 34.1% in 2015. And since its initial public offering (IPO) in May 2012, Facebook stock has skyrocketed more than 190%!
So, is there a chance that the stock can soar even higher?
More Upside for Facebook Stock
Well, according to BMO Capital Markets, the answer is yes.
Brian Belski, chief investment strategist at BMO Capital Markets, recently said that investors should add tech stocks to their portfolios. In particular, he recommended four stocks that included Facebook. (Source: “Apple, Facebook, Alphabet: Load Up on Tech at a Discount, Says BMO,” Barrons, March 17, 2016.)
Belski is not the only analyst bullish on the stock. The median price target for Facebook stock is at $135.00 among Wall Street analysts. That’s a 20% premium over today’s price. (Source: “Analyst Opinion,” Yahoo! Finance, last accessed March 18, 2016.)
Going forward, there are quite a few catalysts that could keep the momentum going in FB stock.
For instance, Facebook’s acquisition of the photo-sharing app Instagram is turning out to be fruitful. While being a popular app in both the “iOS” and “Android” app stores, Instagram didn’t roll out advertising until last September. But since then, advertising growth has been nothing less than phenomenal. Last month, Instagram announced that the app has more than 200,000 advertisers. (Source: “200,000 Advertisers on Instagram,” Instagram’s Blog, February 24, 2016.)
To give you an idea how big of an achievement this is, let’s compare this number with other social media platforms. Taking Twitter Inc (NYSE:TWTR) as an example, Twitter began selling advertisements more than five years ago and now has around 130,000 advertisers.
Instagram is also beating Twitter when it comes to userbase. Today, the photo-sharing app has more than 400 million monthly active users (MAUs). That’s 80 million more than what Twitter. (Source: “Twitter Q4 and Fiscal Year 2015 Shareholder Letter,” Twitter Inc web site, February 10, 2016.)
Note that despite its size, growth in Facebook’s main app has also been impressive. In the most recent quarter, Facebook grew its MAUs by 14% year-over-year. The company now has a whopping 1.59 billion monthly active users. (Source: “Facebook Reports Fourth Quarter and Full Year 2015 Results,” Facebook Inc, January 27, 2016.)
One of the concerns surrounding Facebook these days is that the company’s social network platform might lose its appeal to messaging apps. But guess what? Facebook also happens to own the biggest messaging app in the world.
I’m talking about WhatsApp, which was bought by Facebook two years ago. Today, WhatsApp has reached one billion monthly active users, making it the most popular messenger app in the world. (Source: “Number of Monthly Active WhatsApp Users Worldwide From April 2013 to February 2016,” Statista, last accessed March 18, 2016.)
It looks like WhatsApp is about to start making money for Facebook as well. The company is not going to simply run third-party ads on the messaging app. Instead, it would try to get users to communicate with businesses and organizations that they want to hear from via the app.
The Bottom Line on Facebook Stock
As obvious as it sounds, social network companies benefit from network externalities. To put it simply, the more people using a certain social network platform, the more appealing the platform becomes. The same can also be said for messaging apps.
With the largest social network platform and the largest messaging app in the world, Facebook stock is poised for further gains down the road.